Question

Bill has just returned from a duck hunting trip. He brought home eight ducks. Bill’s friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John presented him with the following cost estimate per duck:

Camper and equipment:
Cost, $15,000; usable for eight seasons; 8 hunting trips per season	$	234
Travel expense (pickup truck):
100 miles at $0.40 per mile (gas, oil, and tires—$0.22 per mile; depreciation and insurance—$0.18 per mile)		40
Shotgun shells (two boxes per hunting trip)		35
Boat:
Cost, $2,080, usable for eight seasons; 8 hunting trips per season		33
Hunting license:
Cost, $70 for the season; 8 hunting trips per season		9
Money lost playing poker:
Loss, $24 (Bill plays poker every weekend whether he goes hunting or stays at home)		24
Bottle of whiskey:
Cost, $15 per hunting trip (used to ward off the cold)		15
Total cost	$	390
Cost per duck ($390 ÷ 8 ducks)	$	49

Required:

1. Assuming the duck hunting trip Bill has just completed is typical, what costs are relevant to a decision as to whether Bill should go duck hunting again this season?

2. Suppose Bill gets lucky on his next hunting trip and shoots 8 ducks using the same amount of shotgun shells he used on his previous hunting trip to bag 8 ducks. How much would it have cost him to shoot the last two ducks?

Answer 1

Solution:-

1. Assuming the duck hunting trip Bill has just completed is typical, what costs are relevant to a decision as to whether Bill should go duck hunting again this season:-

Statement of relevant cost
Particulars	Amount
Travel expense (pickup truck) 100 miles at (gas, oil, and tires—$0.22 per mile)	22
Shotgun shells (two boxes)	35
Bottle of whiskey	15
Total relevant cost	72

This answer assumes that Bill would not be drinking the bottle of whiskey anyway. It also assumes that the resale values of the camper, pickup truck, and boat are not affected by taking one more hunting trip.

The money lost in the poker game is not relevant because Bill would have played poker even if he did not go hunting. He plays poker every weekend.

The other costs are sunk at the point at which the decision is made to go on another hunting trip.

2. Suppose Bill gets lucky on his next hunting trip and shoots 8 ducks using the same amount of shotgun shells he used on his previous hunting trip to bag 8 ducks. How much would it have cost him to shoot the last two ducks:-

Cost of last two ducks

$ 0

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